Assessing Rational Expectations 2: "Eductive" Stability in Economics
AbstractThe rational expectations hypothesis (REH) dominates economic modeling in areas ranging from monetary theory, macroeconomics, and general equilibrium to finance. In this book, Roger Guesnerie continues the critical analysis of the REH begun in his Assessing Rational Expectations: Sunspot Multiplicity and Economic Fluctuations, which dealt with the questions raised by multiplicity and its implications for a theory of endogenous fluctuations. This second volume emphasizes "eductive" learning: relying on careful reasoning, agents must deduce what other agents guess, a process that differs from the standard evolutionary learning experience in which agents make decisions about the future based on past experiences. A broad "eductive" stability test is proposed that includes common knowledge and results in a unique "rationalizable expectations equilibrium." This test provides the basis for Guesnerie's theoretical assessment of the plausibility of the REH's expectational coordination, emphasizing, for different categories of economic models, conditions for the REH's success or failure. Guesnerie begins by presenting the concepts and methods of the eductive stability analysis in selected partial equilibrium models. He then explores to what extent general equilibrium strategic complementarities interfere with partial equilibrium considerations in the formation of stable expectations. Guesnerie next examines two issues relating to eductive stability in financial market models, speculation and asymmetric price information. The dynamic settings of an infinite horizon model are then taken up, and particular standard and generalized saddle-path solutions are scrutinized. Guesnerie concludes with a review of general questions and some "cautious" remarks on the policy implications of his analysis.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoThis book is provided by The MIT Press in its series MIT Press Books with number 0262072580 and published in 2005.
Contact details of provider:
Web page: http://mitpress.mit.edu
eductive stability; rational expectations; market models;
Find related papers by JEL classification:
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Jean-Paul Fitoussi & Paul Hubert, 2010. "Monetary Policy, Imperfect Information and the Expectations Channel," Sciences Po publications info:hdl:2441/f4rshpf3v1u, Sciences Po.
- Massimo Cingolani, 2008. "Full Employment as a Possible Objective for EU Policy I. A Perspective From the Point of View of The Monetary Circuit," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(1), pages 89-114, March.
- William Branch & George W. Evans & Bruce McGough, 2012.
"Finite Horizon Learning,"
CDMA Working Paper Series
201204, Centre for Dynamic Macroeconomic Analysis.
- Branch, William & Evans, George W & McGough, Bruce, 2012. "Finite Horizon Learning," SIRE Discussion Papers 2012-16, Scottish Institute for Research in Economics (SIRE).
- William A. Branch & George W. Evans & Bruce McGough, 2010. "Finite Horizon Learning," University of Oregon Economics Department Working Papers 2010-15, University of Oregon Economics Department.
- Ghosal, Sayantan, 2006. "Intertemporal coordination in two-period markets," Journal of Mathematical Economics, Elsevier, vol. 43(1), pages 11-35, December.
- Roger Guesnerie, 2005. "Strategic substitutabilities versus strategic complementarities: Towards a general theory of expectational coordination?," Working Papers halshs-00590856, HAL.
- Michael Woodford, 2012. "Principled Policymaking in an Uncertain World," INET Research Notes 10, Institute for New Economic Thinking (INET).
- Maik Heinemann, 2007. "E–stability and stability of adaptive learning in models with asymmetric information," Working Paper Series in Economics 69, University of Lüneburg, Institute of Economics.
- Roman Frydman & Edmund S. Phelps, 2013.
"Which Way Forward for Macroeconomics and Policy Analysis?
[Rethinking Expectations: The Way Forward for Macroeconomics]," Introductory Chapters, Princeton University Press.
- Gaetano Gaballo, 2008. "Interactive Learning and Behavioral Sunspots," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 1008, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
- Roger Guesnerie, 2008. "Macroeconomic and monetary policies from the "eductive" viewpoint," Working Papers halshs-00586749, HAL.
- Massimo Cingolani, 2010. "PPP Financing in the Road Sector: A Disequilibrium Analysis Based on the Monetary Circuit," Transition Studies Review, Springer, vol. 17(3), pages 513-550, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jake Furbush).
If references are entirely missing, you can add them using this form.